The funded level of S&P 1500 pension plans remained flat in August, resulting in a $213 billion deficit.
According to Mercer’s latest data, the funded ratio of these plans remained at 89 percent, which is 15 percent higher than it was at the end of 2012.
Equity markets saw losses during the month with the S&P 500 index falling 3.1 percent and the MSCI EAFE falling 1.6 percent.
The good news? Discount rates continued to rise, which reduced the liabilities: the Mercer Yield Curve discount rate for mature pension plans was up 17 basis points for the month and is up 92 basis points year-to-date.
“While there was no significant change in the funded ratio, there was a lot of volatility underpinning both the asset and liability numbers this month,” said Jonathan Barry, a partner in Mercer’s retirement business. “We saw a lot of uncertainty in the market around the Fed’s bond buying program, coupled with concerns around global geopolitical events, resulting in equity markets performing quite poorly for the month.”
He added that this was essentially offset by an increase in bond rates, which largely derived from these same factors.
Mercer estimates the aggregate funded status position of plans operated by S&P 1500 companies on a monthly basis.
The estimated aggregate value of pension plan assets of the S&P 1500 companies as of Dec. 31, 2012, was $1.59 trillion, compared with estimated aggregate liabilities of $2.14 trillion. Allowing for changes in financial markets through Aug. 31, changes to the S&P 1500 constituents and newly released financial disclosures, the estimated aggregate assets at the end of August were $1.73 trillion, compared with the estimated aggregate liabilities of $1.94 trillion.